A leader of the House of Representatives on Thursday said forcing the “radical” overhaul on the country’s tax system may not only prove to be imprudent, time-wasting and fiscally unhealthy, but will also bring about more harm than good in the long run.
Deputy Speaker and Liberal Party Rep. Romero S. Quimbo of Marikina issued the statement following the second deliberation of the House Committee on Ways and Means on the Department of Finance (DOF)-backed Comprehensive Tax Reform Package (CTRP) on Wednesday.
According to Quimbo, the lower chamber and the DOF should prioritize the passage of the long-sought for personal income tax-reform bill, which has been effectively held hostage by the contentious tax package of the DOF.
“What started out as our clamor for immediate income-tax relief for the salary worker has been sidetracked and waylaid by the DOF’s push for the imposition of massive and substantial new taxes solely for the purpose of raising more revenue,” he said.
“What is happening now is that the personal income-tax reform we have been asking for is being held hostage by the DOF, who has promised to ‘release’ it only if Congress gives a ransom in the form of additional excise taxes on fuel and other additional new taxes,” Quimbo said.
While not entirely disagreeing with the concept of imposing excise taxes on gasoline and even new taxes, the lawmaker added a more exhaustive study needs to be undertaken to ensure that the poor will not be the hit by the new taxes.
“Let us not rush the imposition of these new taxes, some of which we have already seen as failures in the Philippine setting today. The process will obviously take time. Meanwhile, the long-suffering income-tax earners are caught in the crossfire,” said Quimbo, a former chairman of the ways and means committee.
HE also called for more consultations with affected sectors whose tax privileges will be withdrawn, including the business-process outsourcing (BPO) companies, cooperatives, socialized housing and the automobile industry.
“It is becoming increasingly clear that we have to do tax reform in phases so as not to delay the much-needed inflation-adjustment of individual income tax,” he said.
“Adjusting the tax brackets to inflation is an instant tool for social justice, as it seeks to immediately rectify the basic inequity of our system while we give time for the more comprehensive reforms to be fine-tuned and polished,” Quimbo added.
Quimbo also pointed out the need for a better tax administration.
He said the Bureau of Customs (BOC) loses an estimated amount of P200 billion a year, or P547 million a day, in revenue due to smuggling while the Bureau of Internal Revenue (BIR) loses P66 billion in foregone revenue due to low tax compliance of professionals and entrepreneurs.
“Currently, there are a lot of leakages in the BOC and the BIR. Unless we improve tax administration first, new taxes will not be effective. The BIR has been failing in its collection of the current taxes we have now, what more if they are tasked to collect additional and more complicated ones?” Quimbo said.
Poor vs rich
For his part, Bayan Muna Rep. Carlos Isagani Zarate said the tax-reform package of the DOF will hits more on the poor rather than the rich.
“Aside from adding more excise taxes and expanding the value-added tax [VAT] base among others, the DOF is also planning to tax money-remittance centers, which OFWs [overseas Filipino workers] and the common folk often use to send money to their poor family members and relatives,” he said.
“What is more appalling is the proposal to expand the VAT base instead of doing away with antipoor taxes, like VAT on systems loss on electricity,” Zarate added.
HE added the DOF has not only taken hostage the lowering of income taxes by tying it up with increase in excise taxes and VAT, “it seems that they are also blackmailing Filipinos with this tax-reform package.”
The DOF’s CTRP was principally authored by House Committee on Ways and Means Chairman and PDP-Laban Rep. Dakila Carlo Cua of Quirino.
Finance Undersecretary Karl Kendrick Chua said only with this sizable increase in revenues through tax can the government meet its goal of drastically reducing poverty and transforming the country into an upper middle-income economy in 2022 by spending big on infrastructure, human capital—education, health, lifelong training and research and development—and social protection for the poor and other vulnerable sectors.
The tax package restructures the tax rates and exempts individuals earning a gross income of P250,000 and below.
However, DOF’s proposal also includes the imposition of excise tax on fuel as compensatory measure for the foregone revenues due to the lowering of income tax. DOF proposes a staggered increase of P6.00 per liter of diesel, kerosene, and LPG to be imposed within a 3-year period.
The bill also includes the relaxation of the Bank Secrecy Act, imposition of excise taxes on automobiles and taxing Philippine Charity Sweepstakes numbers’ game and lotto winnings.
The tax reform package involves foregone revenue of around P200 billion but at the same time will generate around P206.8 billion for the government in the first full year of its implementation.